Best Buy (NYSE:BBY), currently undergoing a stock slump due to decreased consumer electronics demand, might be on the verge of recovery, according to Goldman Sachs analyst Kate McShane. On Thursday, she upgraded the rating of the retail giant's stock to 'Buy' and raised her price target to $85 from the current $70.53, suggesting a potential 21% increase. This aligns closely with the InvestingPro Fair Value of $86.63, indicating an optimistic outlook for the company.
The downturn in Best Buy's fortunes in 2023 followed an unprecedented surge in purchases triggered by the pandemic. McShane predicts a more positive 2024 for the company based on its optimistic outlook for TV and laptop sales. The expectation of robust revenue growth is also driven by the potential need for replacement of products bought during the pandemic. This prediction is supported by InvestingPro's data, which shows a market cap of 15.31B USD and a promising P/E ratio of 12.09.
Best Buy could additionally benefit from a low performance benchmark set by seven consecutive quarters of declining sales. The company's shares have fallen by 12% this year, leading to a lower valuation. Currently, the stock is trading at 10.6 times forward earnings, which is below its five-year average. McShane argues that this undervaluation is not reflected in the current valuation, hinting at a potential upturn in the near future.
InvestingPro Tips also shed light on Best Buy's financial health. The company has raised its dividend for 5 consecutive years and has maintained dividend payments for 21 consecutive years, reflecting a consistent return for shareholders. Despite a declining trend in earnings per share, Best Buy remains a prominent player in the Specialty Retail industry, with strong cash flows that can sufficiently cover interest payments.
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